Filed 3/6/13; pub. order 4/2/13 (see end of opn.)
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION TWO
OSCAR GONZALEZ et al.,Plaintiffs and Respondents,
v.
DOWNTOWN LA MOTORS, LP et al.,
Defendants and Appellants. / B235292
(Los Angeles County
Super. Ct. No. BC350769)
APPEAL from a judgment of the Superior Court of Los Angeles County. Mary H. Strobel, Judge. Affirmed.
Dickstein Shapiro, Arthur F. Silbergeld and Jennifer A. Awrey; Greines, Martin, Stein & Richland, Robin Meadow, Cynthia E. Tobisman, and Alana H. Rotter for Defendants and Appellants.
Gartenberg Gelfand Hayton & Selden and Aaron C. Gundzik; Law Offices of Neal J. Fialkow and Neal J. Fialkow for Plaintiffs and Respondents.
Curiale Hirschfeld Kraemer LLP and Felicia R. Reid for National Automobile Dealers Association as Amicus Curiae on behalf of Defendants and Appellants.
Nossaman LLP and John T. Kennedy for California Automotive Business Coalition as Amicus Curiae on behalf of Defendants and Appellants.
Fine, Boggs & Perkins LLP, John P. Boggs and David J. Reese for California New Car Dealers Association and Alliance of Automobile Manufacturers as Amicus Curiae on behalf of Defendants and Appellants.
Altshuler Berzon LLP, Eve H. Cervantez and Eileen B. Goldsmith for California Employment Lawyers Association as Amicus Curiae on behalf of Plaintiffs and Respondents.
______
In this wage and hour class action, the issue presented is whether California’s minimum wage law requires an employer that compensates its automotive service technicians on a “piece-rate” basis for repair work must also pay those technicians a separate hourly minimum wage for time spent during their work shifts waiting for vehicles to repair or performing other non-repair tasks directed by the employer. The employer contends it was not required to pay the technicians a separate hourly minimum wage for such time because it ensured that a technician’s total compensation for a pay period never fell below what the employer refers to as the “minimum wage floor” -- the total number of hours the technician was at work during the pay period (including hours spent waiting for repair work or performing non-repair tasks), multiplied by the applicable minimum wage rate. The employer did so by supplementing a technician’s pay, if necessary, to cover any shortfall between the technician’s piece-rate wages and the minimum wage floor.
The trial court concluded that the employer’s method of compensation violated the minimum wage law because California law does not allow an employer to avoid paying its employees for all hours worked by averaging total compensation over total hours worked in a given pay period. The trial court cited Armenta v. Osmose, Inc. (2005) 135 Cal.App.4th 314 (Armenta), as support for its ruling.
We too find the court’s reasoning in Armenta to be persuasive. Applying that reasoning here, we conclude that class members were entitled to separate hourly compensation for time spent waiting for repair work or performing other non-repair tasks directed by the employer during their work shifts, as well as penalties under Labor Code section 203, subdivision (a). We therefore affirm the judgment.
BACKGROUND
The parties
Defendant and appellant Downtown LA Motors, LP doing business as Downtown LA Motors Mercedes Benz is an automobile dealership that sells and services Mercedes-Benz automobiles. Defendant Shammas Automotive Holdings, Inc. is its owner. Those entities are referred to collectively as DTLA.
Plaintiffs are a class of 108 automotive service technicians who worked for DTLA between April 2002 and June 2008.
DTLA’s compensation system
DTLA compensates its service technicians on a piece-rate basis, which differs from an hourly wage method in that technicians are paid primarily on the basis of repair tasks completed. Under DTLA’s piece-rate system, technicians are paid a flat rate ranging from $17 to $32, depending on the technician’s experience, for each “flag hour” a technician accrues. Flag hours are assigned by Mercedes-Benz to every task that a technician performs on a Mercedes-Benz automobile and are intended to correspond to the actual amount of time a technician would need to perform the task. A DTLA technician who completes a repair task accrues the number of flag hours that Mercedes-Benz assigns to that task, regardless of how long the technician actually took to complete it. DTLA technicians accrue flag hours only when working on a repair order.
DTLA calculates its technicians’ pay for an 80-hour pay period by multiplying flag hours accrued during that pay period by the technician’s applicable flat rate. For example, a technician with a flat rate of $26 who accrued 150 flag hours in a pay period would earn 150 x $26 or $3,900.
In addition to tracking a technician’s flag hours, DTLA also keeps track of all the time a technician spends at the work site whether or not the technician is working on a repair order. At the end of each pay period, DTLA calculates how much each technician would earn if paid an amount equal to his total recorded hours “on the clock” multiplied by the applicable minimum wage. DTLA refers to this amount as the “minimum wage floor.” If a technician’s flat rate/flag hour pay falls short of the minimum wage floor, DTLA supplements the technician’s pay in the amount of the shortfall.[1]
Plaintiffs’ experience
Plaintiffs worked eight-hour shifts. During their shifts, plaintiffs were required to remain at DTLA’s place of business and had to obtain permission to leave during a shift if they were not working on a repair order. Plaintiffs were also required to clock in when they arrived for work, clock in and out for lunch, and clock out at the end of their shift.
Plaintiffs regularly did not have repair work to do because there were not enough vehicles to service. When this occurred, plaintiffs had to remain at work, and those who asked to leave early were told that they needed to stay because customers might come in. Plaintiffs accrued no flag hours during time spent waiting for cars to repair. While waiting for repair work, plaintiffs were expected to perform various non-repair tasks, including obtaining parts, cleaning their work stations, attending meetings, traveling to other locations to pick up and return cars, reviewing service bulletins, and participating in on-line training. They accrued no flag hours while performing these non-repair tasks.
The instant lawsuit
Plaintiffs filed the instant action against DTLA claiming that DTLA violated California law by failing to pay technicians a minimum wage during their waiting time -- periods of time they were on the clock, but waiting for repair orders or performing other non-repair tasks. Plaintiffs also claimed that technicians terminated from employment during the class period were entitled to penalties under Labor Code section 203, subdivision (a) because DTLA had failed to pay these technicians all the wages they were due upon their termination.
The trial court denied cross-motions for summary adjudication filed by the parties as to whether DTLA technicians were entitled to a separate hourly pay for waiting time in addition to their flag hour pay and minimum wage floor supplement, and the matter proceeded to a bench trial.
The parties presented documentary evidence as well as testimony by class members and expert witnesses regarding the amount of waiting time experienced by class members. Both parties also presented expert testimony as to the amount per pay period that class members either were or were not underpaid.
The trial court issued a proposed statement of decision, to which DTLA objected. After hearing argument on those objections, the trial court issued a final statement of decision on June 20, 2011.
The trial court ruled in favor of plaintiffs, concluding that California law requires class members to be paid for their waiting time between work on repair orders. The trial court found the testimony of plaintiffs’ expert to be “credible,” and adopted that expert’s conclusions that plaintiffs experienced waiting time of 1.85 hours per day on average, that the average amount of unpaid compensation for waiting time per plaintiff was $27.76 per day, and that in total, plaintiffs lost the amount of $553,653 in uncompensated time during the class period. The trial court determined that the value of the class’s waiting time, including interest, was $1,555,078 and awarded that sum to plaintiffs. The trial court also awarded plaintiffs penalties in the amount of $237,840 under Labor Code section 203, subdivision (a) for DTLA’s willful failure to pay all wages owed them at the time their employment was terminated.
This appeal followed.
DISCUSSION
I. Applicable Legal Principles and Standard of Review
California’s minimum wage requirements are set forth in wage orders promulgated by the Industrial Welfare Commission (IWC), the agency formerly authorized to regulate working conditions in California. (Martinez v. Combs (2010) 49 Cal.4th 35, 54-55.) Although the IWC was defunded in 2004, its wage orders remain in effect. (Soderstedt v. CBIZ Southern California, LLC (2011) 197 Cal.App.4th 133, 145, fn. 1.)
Wage orders are quasi-legislative regulations and are construed in accordance with the ordinary principles of statutory interpretation. (Aleman v. Airtouch Cellular (2012) 209 Cal.App.4th 556, 568 (Aleman).) Under those principles, our analysis begins by ascertaining the legislative intent underlying the wage order “so that we may adopt the construction that best effectuates the purpose of the law. [Citation.]” (Hassan v. Mercy American River Hospital (2003) 31 Cal.4th 709, 715.) To do so, we first examine the words of the wage order as the best indication of legislative intent. (Brinker Restaurant Corp. v. Superior Court (2012) 53 Cal.4th 1004, 1026 (Brinker).) Those words should be given their ordinary and usual meaning and should be construed in their statutory context. (Ibid.) Judicial construction that renders any part of the wage order meaningless or inoperative should be avoided. (Ibid.)
If the language of the wage order is clear, it is applied without further inquiry. (Aleman, supra, 209 Cal.App.4th at p. 568.) If the language can be interpreted to have more than one reasonable meaning, a court may consider “‘a variety of extrinsic aids, including the ostensible objects to be achieved, the evils to be remedied, the legislative history, public policy, contemporaneous administrative construction, and the statutory scheme of which the statute is a part.’ [Citation.]” (Id. at pp. 568-569.)
“State wage and hour laws ‘reflect the strong public policy favoring protection of workers’ general welfare and “society’s interest in a stable job market.” [Citations.]’ [Citations.]” (Cash v. Winn (2012) 205 Cal.App.4th 1285, 1297 (Cash).) They are therefore liberally construed in favor of protecting workers. As our Supreme Court has stated, “‘[I]n light of the remedial nature of the legislative enactments authorizing the regulation of wages, hours and working conditions for the protection and benefit of employees, the statutory provisions are to be liberally construed with an eye to promoting such protection.’ [Citations.]” (Brinker, supra, 53 Cal.4th at pp. 1026-1027; see also Murphy v. Kenneth Cole Productions, Inc. (2007) 40 Cal.4th 1094, 1103 [given the Legislature’s remedial purpose, “statutes governing conditions of employment are to be construed broadly in favor of protecting employees”].)
A reviewing court determines the meaning of a wage order de novo. (Combs v. Skyriver Communications, Inc. (2008) 159 Cal.App.4th 1242, 1253.)
II. Wage Order No. 4
The wage order at issue in this case is Wage Order No. 4-2001,[2] commonly known as Wage Order No. 4. Subdivision 4(B) of that wage order provides as follows: “Every employer shall pay to each employee, on the established payday for the period involved, not less than the applicable minimum wage for all hours worked in the payroll period, whether the remuneration is measured by time, piece, commission, or otherwise.” (Cal. Code Regs., tit. 8, § 11040, subd. (4)(B).)
“Hours worked” is defined in subdivision 2(K) of the wage order as “the time during which an employee is subject to the control of an employer, and includes all the time the employee is suffered or permitted to work, whether or not required to do so. (Cal. Code Regs., tit. 8, § 11040, subd. (2)(K).)
III. The Parties’ Contentions
DTLA contends its method of compensating technicians complies with the plain language of Wage Order No. 4 because technicians are paid an amount “not less than” the amount they would have earned had they been paid the applicable hourly minimum wage for “all hours worked” during a given pay period. DTLA argues that compliance may be achieved by supplementing a technician’s piece-rate wages in an amount necessary to cover any shortfall between those wages and the “minimum wage floor,” or the amount the technician would have earned if paid an hourly minimum wage for all hours “on the clock,” including waiting time, during a pay period.
Plaintiffs and amicus California Employment Lawyers Association[3] argue that the plain meaning of the term “all hours worked” is “each and every hour” worked and that technicians should have been separately compensated, at the applicable minimum wage rate, for “each and every hour” of time spent waiting for repair work. The trial court agreed with plaintiffs and cited Armenta as support for that interpretation.
DTLA argues that the trial court’s interpretation contravenes the plain language of the wage order, which does not distinguish between waiting time and productive time and does not require an employee paid on a piece-rate basis to be compensated separately for waiting time. DTLA and its amici contend that such interpretation undermines the piece-rate compensation system, which is intended to reward technicians for performing repair tasks efficiently. DTLA and its amici further contend Armenta does not and should not apply to piece-rate compensation systems such as the one at issue here and that the trial court erred by awarding plaintiffs penalties under Labor Code section 203.
IV. Armenta
In Armenta, Division Six of the Court of Appeal, Second Appellate District construed the same language in the same wage order that is at issue here and concluded that it “expresses the intent to ensure that employees be compensated at the minimum wage for each hour worked.” (Armenta, supra, 135 Cal.App.4th at p. 323, italics added.) The court in Armenta further concluded that the employer’s method of averaging employees’ hours worked in a given pay period in order to compute its minimum wage obligations violated the minimum wage law.
The plaintiffs in Armenta were employed by a company that maintained utility poles in rural or remote locations. The company provided the employees with a truck that carried the tools and equipment needed to perform the work in the field, and employees were required to travel in the truck from a central meeting place to the various job sites. (Armenta, supra, 135 Cal.App.4th at p. 317.) Employees’ time was considered “productive” if directly related to maintaining utility poles in the field and “nonproductive” if spent performing other tasks such as traveling to and from a job site, loading or maintaining vehicles, and attending safety meetings. (Ibid.) Employees were only paid for “productive” time.
The employer argued that its compensation system did not violate state minimum wage laws because under the terms of the employees’ collective bargaining agreement, it paid hourly wages substantially higher than the applicable minimum wage and total employee compensation exceeded the product of total hours worked (both paid and unpaid) and the minimum wage, resulting in an average hourly rate that was higher than the applicable minimum wage. (Armenta, supra, 135 Cal.App.4th at p. 319.) The court in Armenta ruled that the employer had violated the minimum wage law by not compensating employees for travel time and for time spent on daily paperwork. (Id. at p. 320.)
As support for its ruling, the Armenta court cited a January 29, 2002 opinion letter issued by the Division of Labor Standards Enforcement (DLSE)[4] as persuasive reasoning why, under California law, the employees were entitled to compensation for all hours worked. (Armenta, supra, 135 Cal.App.4th at pp. 319-320.) In the opinion letter, the DLSE acknowledged that the minimum wage law is “susceptible” to two “divergent” interpretations, as espoused by the parties in Armenta and by the respective parties in the instant case: “‘“1) that the obligation to pay minimum wages attaches to each and every separate hour worked during the payroll period, and that payment must be made for all such hours on the established payday, or 2) that the obligation to pay minimum wages for the total number of hours worked in the pay period is determined ‘backwards’ from the date that any payment is due, without considering any hour (or part of any hour) in isolation.”’” (Ibid.) The DLSE endorsed the former interpretation, requiring payment of the minimum wage for “each and every separate hour worked.” (Ibid.) The DLSE noted that although federal courts had consistently applied the latter interpretation, significant differences between federal and California labor laws required a different approach in California. (Ibid.)